Dec
12/15
1

What’s the scoop on PPO? HMO? HSA?

in Human Resources, Insurance

What is HMO?

HMO stands for Health Maintenance Organization. This form of health insurance combines a range of coverages in a group basis. Doctors and other professionals are paid a flat monthly fee whether you see them or not. You pay the same amount every month, as long as you see doctors within the approved network. If you need to see a professional outside the network, you will first need a referral from a primary physician within the HMO, and then there may be additional fees to see a doctor outside of the network. Any visit, prescription, or additional care must be approved by the HMO in order to be covered. Kaiser Permanente is an example of an HMO.

What is PPO?

PPO stands for Preferred Provider Organization. This is a health care organization composed of physicians, hospitals, or other medical specialists who provide health care services at a reduced fee. If you see a doctor within the network, you’re responsible for only a small fee. Within the PPO, you have some flexibility to see any doctor you choose. You can see out-of-network professionals if you’re willing to pay a higher price. There is often a copayment, deductible, and coinsurance, but you typically do not need approval from your primary doctor before seeing a specialist. A PPO is similar to an HMO, but the doctors are paid whenever you see them as opposed to a flat monthly fee. Ultimately, in a PPO, you have flexibility to see doctors—within or outside of the network—with less “red tape.”

What is HSA?

HSA stands for Health Savings Account. This is part of an employee’s health plan, and both the employee and the employer can make deposits into the account. The individual employee has the freedom to utilize these funds to pay for a variety of medical expenses, such as insurance co-pays, deductibles, and over-the-counter medications. In fact, you can even use HSA money to pay for cosmetic surgeries, glasses, dental work, etc. Nearly every medical expense can be paid with HSA money. The HSA account operates like an IRA—it earns interest. If you don’t use the money, you can take it out (tax deferred) when you’re 59 ½ years old. In order to setup an HSA, you must have an HSA-qualified insurance policy. This usually means you’re going to pay a higher deductible.

Comments

One Response to “What’s the scoop on PPO? HMO? HSA?”
  1. Auth says:

    Blocking comments is not cool.Both car sriunance and health sriunance are real sriunance ; they’re a hedge against the risk of unexpected losses. Health sriunance covers relatively few expected events.The problem with health sriunance is that it removes the consumer’s incentive to conduct a cost-benefit analysis.I’ve got high cholesterol. I should lose weight, exercise, and eat more fiber. If I do those things, I probably won’t need to take medicine. I’m lazy, though; part of the reason is probably that I know that if I end up taking medicine, it’ll only cost me $25/month. If I had to pay for the Lipitor myself (god only knows what it costs), I’d probably take care of myself.There are lots of other examples. Doctors test for conditions even when the risk is low because the marginal cost to the consumer is effectively $0, and the doctor gets a modest benefit if not a cut of the money for the test, then at least a little more protection against a malpractice suit.So health sriunance at least contributes to spiraling medical costs. How do you discipline those costs?HSAs obviously have their own problems. Our medical system doesn’t provide transparent pricing information; there would be a lot of waste during the transition.It would have a bad effect on wealth distribution. Not just financially, but we’d see more poor people with significant, untreated medical problems. Probably a higher mortality rate for the poor, particularly babies born to poor families. (Here, poor means those who wouldn’t qualify for Medicaid but who would have little disposable income for medical treatment.)Eventually, employees who get employer-subsidized health care now would have some or all of the savings returned to them in the form of higher salary. I’m not sure they (we) would be worse off in the long run.I don’t know that HSAs are fair or practical. I do believe though that if we don’t figure out some mechanism for getting consumers to make cost/benefit decisions, the HMOs will eventually do it for them (more than they already do).